Insurance is a common way to protect against financial loss, and life insurance is no exception. However, life assurance is a less familiar term that may be used interchangeably with life insurance.
Understanding the difference between the two can help you make an informed decision about your financial planning.
What is Life Assurance?
Life assurance policy is a type of insurance cover that protects the policyholder for the rest of their life. It’s often referred to as ‘whole of life insurance’ – hence the lifetime of the cover. The policy pays out a cash lump sum, which can be used by your family to help with any financial matters that may arise after your death.
The policy lasts up until your death so long as you continue to pay the monthly premium. As cover is permanent, it can be costly but you will be guaranteed a payout should you pass away.
What is Life Insurance?
Life insurance is a type of policy that provides financial protection for a set period of time (usually 10-30 years). It pays out a cash lump sum if you die during the term of the policy. Most providers may refer to it as level-term life insurance.
Unlike life assurance, the policy will not guarantee a payout at the end of the term. It’s important to remember that life insurance doesn’t cover you for the whole of your life, just the length of the policy. On the plus side, term cover is often cheaper as a result.
What’s the Difference Between Life Assurance and Life Insurance?
The primary difference between life assurance and life insurance is the way in which they are structured.
Life assurance is, essentially, a long-term investment in which the policyholder pays regular premiums over time to ensure a lump sum is paid out when he or she dies. It offers peace of mind as it can provide some financial security for the policyholder’s family – even after they’ve passed away.
Life insurance, meanwhile, is a short-term investment that pays out a lump sum if you die during the term of the policy. The policy does not offer any payout at the end of the term and will not cover you for life. It’s cheaper than life assurance but offers fewer guarantees after death.
Which Type of Cover Do I Need?
When choosing between life assurance and life insurance, you should consider your current financial situation, your personal circumstances, and how much protection you need.
If you need long-term financial security for your family after you die, then life assurance is a good option as it offers a guaranteed payout on death. It’s also ideal if you want a permanent policy with no end date.
If you’re looking for a shorter term of coverage and more affordable premiums, then life insurance might be right for you. It may be cheaper over time, but won’t offer any payout at the end of the term, so it may not provide sufficient security.
You should also consider debts, such as a mortgage. For example, a decreasing term policy can be taken out alongside a mortgage that offers the same level of cover as you pay off the debt.
Ultimately, the best type of policy will depend on how much coverage you need and how long you need it.
Why Should I Invest in Life Cover?
There are plenty of reasons why life cover can be a staple of your family’s finances, including:
- Support for your loved ones – should the worst happen, life cover can provide your family with a lump sum to help them pay for any immediate costs.
- Protection for your home – the lump sum may be used to pay off your mortgage, helping to ensure that your family can stay in the home you worked hard for.
- Cover for your debts – some policies will help you to protect against any outstanding debts that you may have, ensuring they don’t become a burden on your loved ones.
- Leave a legacy for your children – your policy can provide a nest egg for your children to help them make their way in the world.
Be sure to consider your current situation financially before you apply. Think about any debts and obligations you and your family have both now and in the future.
When Should I Consider Getting Covered?
Usually, it’s worth considering life cover if you have people who depend on your income and would be financially affected should something happen to you.
There’s never a bad time to think about life cover, and the sooner you start considering it, the more options you’ll have to protect your family.
As a rule of thumb, it’s best to purchase coverage when you are younger and in good health, as it will be more affordable. Plus, if you are young and healthy, you are more likely to be accepted for cover. Waiting till you’re older could mean that you are more likely to be turned away or face higher premiums.
How Do I Apply for Cover?
Thanks to the internet you can apply for life insurance in just a few clicks. Here are a few steps to take to get covered:
- Decide which type of policy you want and how much coverage your family needs.
- Compare providers to find the best deal for you.
- Fill in the application form, providing accurate information about your health, lifestyle, and financial circumstances.
- Wait for a decision on your application – usually within 48 hours.
- If accepted, sign up and start paying your premiums.
Review your insurance policy regularly, especially if you experience any major changes in your life, such as marriage, having children, or changing jobs. This can help ensure that your family is always adequately covered and that the policy still meets your needs.
So whether you decide to buy life assurance or life insurance, know that your family will be protected if the worst happens. Get covered as soon as possible to ensure your loved ones are protected if anything happens to you.